Start 2021 Off Right With Your January Financial Checklist

John Csiszar
·7 min read
Eva-Katalin / Getty Images
Eva-Katalin / Getty Images

The New Year often brings generic resolutions that get tossed to the wayside within months or even weeks. How many of us have joined a gym the first week of January and resolved to go every day, only to find that life keeps getting in the way?

When it comes to your financial life, however, making and sticking to a plan is critical to your long-term prosperity. The start of the year is a perfect time to both look back and look ahead. From this perspective, you can see just how well you did financially the prior year, while still having time to learn from this and plan out the year ahead. So, how can you make sure you stay on track for the entire new year?

Read More: 18 Resolutions To Get Rich in 2021

One of the keys to success is making a financial checklist and writing it down. You’re more likely to remember something if you write it down, and you’re more likely to stick to it if you can see it every day.

If you need some help on where to begin, check out this list of financial “to-dos” and try to incorporate them into your start-of-the-year planning. It’s a great way to begin 2021 on the right financial footing.

Last updated: Jan. 1, 2021

benimage / Getty Images/iStockphoto
benimage / Getty Images/iStockphoto

Review Your 2020

2020 was undeniably a tough year for many Americans, so you shouldn’t be too hard on yourself if you didn’t hit all of your financial goals. Still, you can learn lessons from 2020 to make your checklist for 2021. For example, did you make a financial plan in 2020 and did you stick to it? Did you run a surplus or a deficit? Were there things beyond your control that created financial difficulty, or did you make financial stumbles of your own accord? Take an honest assessment of how you performed financially in 2020 so you can start making plans for 2021.

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mapodile / Getty Images

Set a New Budget

Setting a budget for 2021 is an important step in your financial plan because it lays bare where all of your money is coming and going. When you track where you spend your money, it makes it easy to make adjustments and increase your savings.

Since 2020 was such a tumultuous year, it’s likely that your budget needs a revamp for 2021. For example, due to the coronavirus-related shutdowns, it’s likely that you spent less money on entertainment, dining and commuting than usual in 2020. However, even with a vaccine currently rolling out, it seems that those budget items will remain lower than usual for at least the first half of 2021. Diverting that money into savings is a sound financial choice.

Budgeting 101: How To Create a Budget You Can Live With

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©Shutterstock.com / Shutterstock.com

Automate Your Savings

The easiest way to boost your savings is to put it on autopilot. Human nature makes it hard to save, as it always seems like there’s something you can spend your money on. But if you automate your savings, it takes emotion and choice out of the equation. Without any effort on your part, funds are automatically taken out of your paycheck and safely tucked away into a savings account. Over time, you likely won’t even miss the auto-savings, but you’ll love the way your account grows in value.

Types of Savings Accounts: Where Is the Best Place To Put Your Savings?

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urbazon / Getty Images

Autopay Your Bills

Life can be so busy in the modern world that it’s easy to forget to pay all of your bills on time. This is particularly true if you have a complicated financial life, with mortgage and auto loan payments, credit cards, utilities and insurance payments. To avoid costly late fees, which amount to just throwing money down the drain, put all of your bills on autopay. You’ll never miss another payment and you’ll never pay another late fee, giving you more money to save.

Read More: 24 Things To Do When You Have More Bills Than Your Paycheck Can Cover

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shapecharge / Getty Images

Increase Your Retirement Contributions

Retirement plans are great financial tools. In addition to the savings aspect, most retirement plans offer tax breaks on contributions and tax-deferred growth.

Ideally, you want to maximize your contributions, setting aside 10% to 20% of your income. If this seems too daunting to try all at once, start by increasing your contributions in 1% increments. You’ll hardly notice the additional money diverting out of your paycheck, and before you know it, you’ll be up to that 10% to 20% level. Whether you increase your contributions by 1% per month or 1% per year, put it on your financial checklist.

Find Out: How Long $1 Million in Savings Will Last in Every State

MartinPrescott / Getty Images
MartinPrescott / Getty Images

Review Your Insurance Contributions

Insurance is an often-overlooked aspect of financial planning, but it’s critically important. The start of the year is a good time to review your financial life and see if there have been any changes. For example, if you’re married and only one of you is working, you’ll want to make sure you have enough life insurance coverage. If you’ve made improvements to your home, you might want to bump up your homeowner’s insurance. Auto insurance and disability insurance should also be reviewed. Consider consulting with a financial professional to see if you should have additional insurance, such as an umbrella liability policy.

New Year, New You: 11 of the Smartest Money Resolutions To Make in 2021

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designer491 / Getty Images/iStockphoto

Beef Up Your Emergency Fund

If there’s one thing 2020 taught a lot of people, it was the importance of having a sizable emergency fund. Hopefully, you weren’t forced to dip into your emergency savings in 2020, but if you were, prioritize rebuilding that emergency fund in 2021.

If you were fortunate enough to avoid raiding your savings, plan on beefing up your emergency fund. It’s impossible to predict when an emergency will arise, so being prepared is the best antidote. Remember, your emergency fund should ideally be large enough to cover not just things like medical bills or unexpected car repairs but also months of lost wages.

Related: Here’s How Much Cash You Need Stashed If an Emergency Happens

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Kerkez / Getty Images/iStockphoto

Rebalance Your Portfolios

The stock market suffered a horrendous crash in early 2020, but in spite of that, it went on to set record highs later in the year. It’s likely that your investment portfolios are out of balance after this record performance. Review your investment objectives and risk tolerance and make sure that your portfolios are still in line with these parameters.

Find Out: Stable Investments Everyone Needs in Their Portfolio

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sturti / Getty Images

Check Your Tax Withholdings

Among the many financial quirks of 2020 was the deferral of Social Security taxes from Sept. 1 to Dec. 31. Although this resulted in a short-term income bump for many taxpayers, this was merely a deferral in tax owed, not a forgiveness. What this means is that you may have a larger tax bill due in 2021 than you imagine. Consult with your tax advisor to see if you need to adjust your tax withholdings to avoid the coming tax bite.

Read More: The Major Tax Changes for 2021 You Need To Know About

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DragonImages / Getty Images/iStockphoto

Review Your Estate Plan

An estate plan sounds like a formal document only used by the rich and famous. However, in reality, everyone should have at least a rudimentary estate plan. If you speak with an estate planning expert, you might discover that you actually do have enough assets that need protecting.

Even if you don’t have the assets or complicated financial life to require trusts and other advanced planning documents, you should at least have a will. If you’re ahead of the game and have already set up an estate plan, review it annually to ensure it is still up to date.

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